Business Context and Reporting Period
Company: Village Super Market, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Reporting Period: 13 and 26 weeks ended January 24, 2009 (Fiscal Year 2009)
Business Overview: The Company operates 25 ShopRite supermarkets in New Jersey and northeastern Pennsylvania. It is the second-largest member of Wakefern Food Corporation, a retailer-owned food cooperative.
Key Financial Metrics
All figures in thousands, except per share data.
| Metric | 13 Wks Ended Jan 24, 2009 |
26 Wks Ended Jan 24, 2009 |
26 Wks Ended Jan 26, 2008 |
|---|---|---|---|
| Sales | $312,714 | $603,698 | $556,388 |
| Gross Profit | $85,061 | $164,533 | $149,628 |
| Gross Margin % | 27.20% | 27.25% | 26.89% |
| Operating Income | $13,868 | $24,951 | $18,289 |
| Net Income | $7,956 | $14,324 | $10,737 |
| Net Income Margin % | 2.54% | 2.37% | 1.93% |
| Cash from Operations (26 wks) | N/A | $29,357 | $21,983 |
| Cash & Equivalents (End of Period) | $54,733 | $54,733 | $52,317 |
| Total Debt (Current + Long-term) | $32,121 | $32,121 | $30,961 |
| Working Capital | $25,812 | $25,812 | $8,871 |
Per Share Data (Class A Basic): $0.74 (13 weeks) / $1.33 (26 weeks).
Per Share Data (Class B Basic): $0.48 (13 weeks) / $0.86 (26 weeks).
Material Changes vs. Prior Period
- Sales Growth: Sales increased 6.8% for the quarter and 8.5% for the six-month period compared to the prior year. This was driven by a 5.9% increase in same-store sales (quarter) and the contribution of two new stores (Franklin and Galloway).
- Profitability: Net income increased 23.6% for the quarter and 33.4% for the six-month period. Gross margin improved due to better departmental margins and product mix, partially offset by higher promotional spending and warehouse assessment charges.
- Expense Management: Operating and administrative expenses decreased as a percentage of sales (21.58% vs 22.13% in the prior quarter) due to reduced payroll costs and operating leverage.
- Liquidity: Working capital improved significantly to $25.8 million from $8.9 million at the end of the prior fiscal year, aided by a portion of notes receivable from Wakefern becoming current.
Outlook, Risks, and Contingencies
- Capital Expenditures: The Company has budgeted approximately $30 million for capital expenditures in fiscal 2009, primarily for a replacement store in Washington, NJ, and a new store in Marmora, NJ.
- Washington Store Contingency: Construction of the Washington replacement store was halted by a court order in January 2009 due to invalid land use board approval. The Company has invested $9.2 million in construction and equipment. If approvals are not reinstated within 3-6 months, a material impairment charge may be recorded.
- Lease Litigation: The leasehold interest in the current Washington store is in litigation. The Company believes the lease extends through January 2010.
- Stock Split: A two-for-one stock split of Class A and Class B common stock was declared in December 2008 and distributed in January 2009.
- Debt Facility: The unsecured revolving credit agreement was amended in December 2008, increasing the borrowing limit to $25 million and extending the maturity to December 31, 2011.
Investor Verification Checklist
- Verify the status of the Washington Land Use Board approval and the timeline for resuming construction of the replacement store.
- Monitor the potential for an impairment charge on the $9.2 million investment in the Washington store if legal approvals are delayed.
- Review the impact of the two-for-one stock split on share count and per-share metrics in future filings.
- Assess the sustainability of same-store sales growth given the noted economic caution and "trading down" by customers.
- Confirm the timeline for the opening of the Marmora store, expected in Spring 2009.